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No. of Recommendations: 5
I do worry about any revenues made from Venezuela.

The company made the right move to beging translating results at the parallel exchange rate since the reason that rate exists is because that's actually the rate people are willing to exchange money at.

I'm not sure if you're alluding to the fact that Venezuelan operations could be nationalized or shut down or some such, but that risk is somewhat smaller than the currency risk the company had been carrying.

The main question I have from the report is the receivable issue on the Payment Processing side. It lowered Cash from Operations by a good bit.

Remember last year the company sold $32.6mm of payments receivable to turn them into cash, which juiced last year's cash flow (see our Q4 2008 update: This was the one-time event, which made it a tough comp to roll over.

You're right that FCF has been lumpy, the general direction is a good one. In terms on building a model, you might ignore the receivables stuff on the front end and opt to build a valuation off of owner earning's and then at the end dock OE some percentage for working capital since based on last year's action, using last year as a guide to say they take a $3mm hit to turn $30mm of receivables into cash. Because receivables probably will continue to pile up as they were previously. The good news this time is the company has $91mm in cash and minimal capex requirements, so it remains in good financial shape.

Overall, I thought this was a strong report notable for the company showing continued operating margin improvement. MercadoPago also continues to scale nicely. Although the company has underperformed the market since our sell recommendation, the company has exceeded my expectations -- a combination that gets my attention.

You'll recall from our original write-up that we called $27 to $35 a "fair value." That range has increased given the margin improvement, though I would like to see the stock fall a bit more before buying -- and perhaps we'll get that opportunity.
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